All Forum Posts by: Rick Turman

@Jim Goebel

Thanks for the reply. You are absolutely right in the fact that I had left something out. I forgot to mention that I do not want to lose this contractor/team but want to keep them busy without buying them out. I'm essence, keep them for myself and not on other projects. I'm not yet in that position to be able to do such transaction but I have the system in place that will streamline our workload just need to pull the trigger.

Thanks again.

I posted this to another PRO forum area that may have been too old for one to be interested in so I am sharing here as well in effort to reach someone who has ran into this situation or to guide me in the right direction.

I've sifted through a handful of other posts and could not find a direct response similar to my concern. Let me enlighten you on the situation, as I will be seeking professional help from my attorney to doctor up the proper legal documentation to get started.

I have just finished another renovation (flip) if you will and am starting to pull more people into this mix. I have successfully completed 4 properties with gains on each, and am looking to gear this structure into a business entity so that the tax burden is less cumbersome and liability is lifted off my shoulders a bit as an individual. Here is my situation:

My Contractor offered the idea of possibly joining teams and continuing to turn homes in a structure that he and I split the costs for Materials and other burdens, while I absorb the cost for labor to continue to pay him of course to keep the team working and afloat. In the end, we handle this in terms of profit sharing. The percentages of profit hasn't been completely decided yet as we are just bringing this to the table. I have been working Time and Materials with this team, and I rather go the route of Bids for the project however If he is tied to a materials $$ amount, I would assume it would push him to complete the job faster and not take too much time to completion. At the moment, I am looking for the best route to approach this without being handled incorrectly.

Second approach to this- we may be completing 1 to 2 more of these fix and flips, and rolling into new build duplexes or quads. I would basically team with him to cover all costs for land and dwelling with possible help from a 3rd investor (Paying interest over time of loan) and eventually Cash out Refi once everything is completed.

We were discussing the different benefits in going this route, and he prefers to buy and hold until mortgage is paid down then sell. I had to explain the Capital gains would then be taxed from the sale unless otherwise 1031 exchanged into a new investment of similar or lesser value within 45 days of closure (new property lined up/under contract and custodial account finalized where exchange would go) If using the cash-flow to invest back into the business, it would and could be a very successful business venture and payout to ourselves if a business venture is the right route to go for this type of situation.

Where I am going with this is to pick your brains as i'm sure all of you at some point may have been in this situation before. Am I approaching this in the right order? Should I be focusing in only 1 niche? Separate entities for Rentals, and Fix and flips with separate Bank accounts I assume? Any suggestions and or guidance is welcome, as either way I will seek legal help to finalize this. Just wanted to put feelers out on what others have experienced. I rather learn from the failures of others rather than fear of failure and falling back into analysis paralysis. However if that is what it takes, I will fail on my own to succeed.

Again thank you all for your time and consideration, and looking forward to your responses. Your time means everything!

Morning BP family!

I am using this area of the forums in effort to reach someone who has ran into this situation or guide me in the right direction.  I've sifted through a handful of other posts and could not find a direct response similar to my concern.  Let me enlighten you on the situation, as I will be seeking professional help from my attorney to doctor up the proper legal documentation to get started.

I have just finished another renovation (flip) if you will and starting to pull more people into this mix.  I have successfully completed 4 properties with gains on each, and am looking to gear this structure into a business entity so that the tax burden is less cumbersome and liability is lifted off my shoulders a bit as an individual.  Here is my situation:

My Contractor offered the idea of possibly joining teams and continuing to turn homes in a structure that he and I split the costs for Materials and other burdens, while I absorb the cost for labor to continue to pay him of course to keep the team working and afloat.  In the end, we handle this in terms of profit sharing.  The percentages of profit hasn't been completely decided yet as we are just bringing this to the table.  I have been working Time and Materials with this team, and I rather go the route of Bids for the project however  If he is tied to a materials $$ amount, I would assume it would push him to complete the job faster and not take too much time to completion.  At the moment, I am looking for the best route to approach this without being handled incorrectly.

Second approach to this is we may be completing 1 to 2 more of these fix and flips, and rolling into new build duplexes or quads.  I would basically team with him to cover all costs for land and dwelling with possible help from a 3rd investor (Paying interest over time of loan) to Cash out Refi once everything is completed.  

We were discussing the different benefits in going this route, and he prefers to buy and hold until mortgage is paid down then sell.  I had to explain the Capital gains would then be taxed from the sale unless otherwise 1031 exchanged into a new investment of similar or lesser value within 45 days of closure (new property lined up/under contract and custodial account finalized where exchange would go)  If using the cash-flow to invest back into the business, it would and could be a very successful business venture and payout to ourselves if a business venture is the right route to go for this type of situation.  

Where I am going with this is to pick your brains as i'm sure all of you at some point may have been in this situation before.  Am I approaching this in the right order?  Should I be focusing in only 1 niche?  Separate entities for Rentals, and Fix and flips with separate Bank accounts I assume?  Any suggestions and or guidance is welcome, as either way I will seek legal help to finalize this.  Just wanted to put feelers out on what others have experienced.  I rather learn from the failures of others rather than fear of failure and falling back into analysis paralysis.  However if that is what it takes, I will fail on my own to succeed.  

Again thank you all for your time and consideration, and looking forward to your responses.  Your time means everything!

-Rick

@Earl Co,

I never was able to get your application to work however appreciate all efforts in putting this together.  Keep up the outstanding work, and may the best team win!

@Miguel Dormany,

You are very welcome for the spreadsheet.  A little late responding to this however, didn't want you all hanging for too long.  BP has awesome tools and actually incorporates this into a gorgeous PDF once compiled.  I still prefer to keep this at hand as a quick tool to use to calculate at my fingertips.

@Pawnce Philip,

If you click the link in my first post, the Onedrive location should still be accessible as I just tested it, however if not, here is the link again.  If you still have problems let me know and I can try to upload:

https://onedrive.live.com/view.aspx?resid=F6E41EF8...

Thanks everyone and Enjoy!

@Lenita Higgs,

A little late responding to this, and I'm sure you already found your answer but just in case, the answer to this (Cash or Loan) really depends on your long term strategy. If you take a look at appreciation of home over loan, you will notice that having a loan vs all cash are almost inverse at half the life of the loan/30 year span if you will. I honestly prefer the BRRRR Method. Buy, Renovate, Rent, Refinance, Repeat. This allows you to be all cash in the beginning having more leverage when it comes time to finding a tenant and refinancing. In essence, try to find a lender (Mom and Pop Bank/Small Local Bank) that will lend 80/20. Most are stuck to Fannie Mae guidelines only offering 75/25 LTV however some may offer more. This will allow you to Flip, and obtain a loan based on the ARV of the property, then rent it out having the tenant pay for your new mortgage thus allowing you to pull all liquid out of the property that you had in. What this means is that you now own the rental, have 0$ cash into it, but allow the property to force appreciation, while the home appreciates in value. Once you re-finance, you now have infinite COC-ROI. You can then start shopping for another, and rinse/repeat. I hope this makes sense, but if it is a little foggy (and may be how I am explaining this) listen to episode 117

https://www.biggerpockets.com/renewsblog/2016/06/0...

@Wayne Brooks

That was my next approach and already contacted the agent to do so.  Great input Wayne.  Cheers!

I am currently in an odd situation at the moment. My Agent has been a godsend and brought me the perfect property to offer on. This seller has come to her, refrained from putting the listing on the MLS, however wants to sell through her. Sounds like every investors dream right? Here is what the Seller requested:

 -Cash Only

- Fast Close

- Cash on Keys 

- Does not want to do anything with the property

- Sister of the Trust is Money Hungry and will take any offer

Every investors dream come true right there.  I've ran an analysis on this and can turn for 60-70K in reno purchase for 40.  I put an offer in at 40K cash offer, fast close, no contingencies.  This property will rent well, and comps are in aroun 139 on the low end to 159 on the medium to high end as it's within walking distance to the elementary school and in a B neighborhood.

My only caveat here is that the seller (The executor of the trust) is willing to move forward with the deal, however his sister is now wanting to intervene and potentially fix it up and sell herself.  It has been a week today since we placed our offer, and I will request another update today on the offer.

A few things to consider:

1.) No initial contract for Offer has been submitted, everything verbal at the moment.

2.) Trying to initiate something creative that would motivate the seller to accept the offer (Cookies, Thank you card, another 1K. etc.)

I am reaching out to you (My BP Family) to provide your input on some suggestions on what to do here as I do not want to lose this property.  Please feel free to reach out, or comment in any way if you have been in this situation before.  I appreciate everyone's suggestions as always!

@Julie Marquez,

Ironically, I found this thread searching for another haha.  Hope all is well with you Julie, and your Business is off to a great start since we last chatted about Flood Insurance!  Long story short, the Flood cert on this home returned "NOT IN FLOOD"  :-)  we were 1 foot over and the new elevation reading stopped the BFE (Base Flood Elevation) about a sidewalk square length away from the dwelling.  

We have since Sold this home to a young family, and flipped another.  We are finishing up with our 3rd property since then, and this time, this home's corner is in flood by .8 inches :-( Homes in this area that are in flood are required to have flood insurance per any bank that will be lending on the property so its a set back.  Debating on how many years of coverage we will provide in hopes we can sell for a good cost.  

Have you done any Yellow Letters yet?  Where do you acquire all of your flips/ Buy and Holds from?  Just looking for some guidance as we are in need to start going door to door or starting a campaign as they are getting swallowed up quick.  Thanks so much for tuning in and hope to hear back!

@Kyle Allen,

Older thread here but I figured I would chime in-in case you are losing sleep over this one.  I flipped a property in 2016 that was "In Flood" however my purchase was contingent on them pulling a flood cert.  Here to find out the "Dwelling" was within feet of the actual flood plain.  Due to the cert being performed, I was able to remove the property from the Flood Plain and was able to sell the house out of flood.  It was only 365$ for me to perform this cert, and it only took 3 days to receive the news back.  By the time we closed, paperwork was in hand and given to the new purchaser of our renovated property.  Not sure if this was the answer you were looking for however is exactly what I went through.

Today, I currently own one that "IS" in flood and am looking to pull another cert. 780 Seems to be the magic number around here and my newly purchased Samsung Gear is reading Altitudes of 789 on the back patio however the basement reads around 780. Our Dwelling sits about 100 yds from the Bayou so I am going to pull the trigger on getting this one surveyed as well. If all else fails, I may Refi, work with my current Lender on allowing me to refi under Private insurance (NON FEMA INSURANCE) and or not purchase flood insurance, as we have had one of the worst floods here recently while flipping and it only came up to the back of the deck. I would feel pretty comfortable in NOT getting insurance in this case, and possibly renting out the property instead. Always have an exit strategy at hand, and turn a bad situation into the best one yet! Cheers!

-Rick

@Justin Silverio,

Love the concept here.  Do you perform the list as well and then mail out or must we bring that to the table for you to do the inner workings?  Thank you kindly!